In the following FAQ, we explain why blanket purchase orders should be replaced whenever possible with supply pipeline planning for efficient, just in time manufacturing. Supply pipeline planning triggers demand-driven purchase orders at self-adjusting intervals to prevent shortages and over-stocking and eliminate the frequent adjustments required with blanket purchase orders to synchronize supply with actual demand.
Is a blanket PO required for volume pricing?
A blanket purchase order with a schedule of deliveries is a traditional means for obtaining a volume price for an item, but it is not the only method. The trend in manufacturing is away from forecast type purchasing that needs constant adjustments and towards just in time replenishment that is triggered by actual demand. Many suppliers are accustomed to working with manufacturing customers who have just in time planning systems and will furnish a volume price in exchange for an annual commitment tracked by actual purchases instead of a blanket purchase order. The supplier benefits from the arrangement because all purchase orders are firmly set without being subject to changes and confirmations.
Use supply pipeline planning whenever possible
Supply pipeline planning is superior to blanket purchasing because demand-driven, self-adjusting purchase orders are far more efficient than forecast-driven, tentative purchase orders that are subject to constant adjustments. So whenever possible, especially when volume pricing is not an issue, always replace blanket purchase orders with supply pipeline planning for efficient, just in time manufacturing. If a volume price is essential and a particular supplier refuses to accept any arrangement other than a blanket purchase order, only then should blanket purchasing be used.